The five major factors working for the steel industry over the last two months

Secondly, the domestic steel market that was plagued because of the imposition of the export duty, that has received relief after the duty was revoked in November.

There were two factors ailing the Chinese market - one was the property market and the second factor was no mobilization as people were stuck at home. Now the Chinese government and authorities are focusing on both of these, so good news from there.

The HRC prices had corrected from around $860 per tonne at the start of our 2022 all the way to around $500. But with this unlock theme playing out, the pricing is currently at around $620-630 per tonne. So that's giving you a case that domestic prices will get some kind of support.

Indian steel prices were at a premium compared to their Chinese counterparts, meaning importing steel from China was cheaper.

That has quickly turned around. From a premium of Rs 8,000, the Indian steel makers went ahead and cut prices, while the Chinese players increased them. Suddenly the entire ratio has flipped and now you have the imported Chinese steel coming at a premium in comparison to the domestic one.

Brokerages like JPMorgan as well as BofAML they are expecting price increases of Rs 2,000 to 3,000 per tonne in the next few months.

Iron ore prices have been on a tear, rising as much as 50 percent from the lows seen recently. Iron ore prices moving up give a bit of a base to steel companies as well. This is advantage to India because most ferrous companies in India get majority of their Iron ore from domestic sources. Domestic iron ore is at a discount to the imported one currently.

Also keep in mind that if iron ore prices move up, then steel prices get a base, and in that context, India is relatively better placed.

Finally, demand has been good. That price increase taken at the start of January has been lapped up by consumers, so that is good news. Additionally, restocking is taking place after a pause when customers stopped buying steel in anticipation of prices falling. Also in the coming quarter, the export volumes will pick up.

Finally, steel and metals is not really about valuations. It's more about momentum investing and that is where we have seen the stocks run-up. But more or less on a price-to-book value basis, it is pretty much in line with what they've been trading at.